Probability distortion in decisions under risk
Akademia Leona Koźmińskiego
2014-03-17 (19) Decyzje
This paper presents the results of study on the probability distortion. The distortion is studied at two levels: (i) in the decision maker's perception (expressed as subjective judgements), and (ii) in the decision maker's choices (expressed in decision weights). The study examined how the two types of distortion – concerning perception and weights – depend on the way information on probability is presented. Two formats of probability information were distinguished: descriptive (expressed in numbers) and experience.
The results confirmed the hypothesis of lower perceptual distortion of objective probability when the information on payout distribution was presented using the experience-based format than when the information was given as a description. The hypothesis on the lower distortion of probability in decision weights with the experience probability format was not confirmed. An unexpected result was a lower risk seeking with the experience format. This effect seems to be a result of attributing lower weights than with the descriptive format. Furthermore, it appears that the probability distortion in decision weights at least partly results from the distortion in perception.
Idzikowska, K. . (2013). Probability distortion in decisions under risk. Decyzje, (19), 75 97. https://doi.org/10.7206/DEC.1733-0092.4 (Original work published 2014-03-17)
Idzikowska, K. . “Probability Distortion In Decisions Under Risk”. 2014-03-17. Decyzje, no. 19, 2013, p. 75 97.
Idzikowska, Katarzyna . “Probability Distortion In Decisions Under Risk”. Decyzje, Decyzje, no. 19 (2013): 75 97. doi:10.7206/DEC.1733-0092.4.